What Can a Dinner Banquet Tell Us About Philanthropy & Luxury in China?

A few months back about 50 of China’s business and philanthropy elites came together for a 90-minute discussion over dinner. The venue was a mansion on the edge of Beijing - a gilded and karaoke-equipped rococo castle, modeled after the baroque 17th century Chateau de Maisons-Laffitte in France. The hosts were the billionaire philanthropic duo - Warren Buffet & Bill Gates. Media dubbed the dinner as the "Ba Bi" Banquet - after the Chinese transliterations of the host’s names. ("Ba Bi" incidentally is also the Chinese for "Barbie").

BaBi was hot in media much before it even happened. There were news reports about a business tycoon from south China pledging all of his fortune to charity after his death and motivating other Millionaires in China to come forward and contribute. There were reports that the attendees had requested the list of invitees not to be made public for they were afraid of attracting unnecessary attention to their fortune. There were also voices from China’s philanthropic circles that Chinese did not need to learn philanthropy from Americans etc.

But the string of events in the run up to Ba Bi and even after that, have more to tell us than just who pledged to donate and who did not. BaBi tells us a lot about the attitude of China’s super rich on two counts – one obviously is Philanthropy and the other less obvious but very evident is the attitude of China’s super rich towards luxury and indulgence.

What makes this rich group so important is its large & growing numbers. According to Shanghai-based analyst Rupert Hoogewerf China has 64 billionaires in US-dollar terms (second only to the United States) and at least 875,000 U.S. dollar millionaires. And these numbers are growing healthily. The disposable income of the richest 10% of Chinese families is 2008 was USD 20,500 – almost as much as 3 times the official government estimates. And this does not even include the total undisclosed income in China, which is estimated to be over 1.4 trillion (about the GDP of India!).

But in spite of this prosperity, for most of the Chinese the idea of charity seems a bit detached from daily life. While the total amount donated, as per Government records, has risen from $1.5 billion (RMB 10 billion) in 2006 to over $7.5 billion (RMB 50 billion) in 2009, it is still a negligible fraction of the $300 billion annually donated in the US, which is over 2% of the country's GDP. Also, only around 20% of China's annual donations actually come from individuals; the rest are made by private enterprises. In the US, for example this number is as high as 70%!

Contrast this attitude towards philanthropy with the state of luxury. In 2009, China alone accounted for 25% of the world's total luxury consumption, making it the second largest luxury market after Japan, whose GDP per capita is more than 10 times higher. And yet despite their consumerist instincts, the Japanese still appear to be more charitable in general than the Chinese. According to the 2010 World Giving Index, released by the Charities Aid foundation, 17% of the Japanese population has made charitable donations, compared to China's 11%.

What does all this mean? Does BaBi tell us anything more than what these numbers reveal? How?

BaBi was actually a terrific opportunity to glean insights about the China’s rich, their riches and their desire to give. Here are five things that I learnt from the much-publicized dinner.

1. Short history of prosperity & thus philanthropy in modern China: “I just started making money and now you want me to give it all up?”

Because of China’s socialist background and the fact that wealth China is so new, the notion of government’s role versus philanthropy is still not fully developed. Historically, especially before 1949, China’s wealth was based, in one way, on familial wealth & power via heirlooms, bequeathments and hereditary titles. China comes from an Imperial, agrarian society, where power and social status is based on familial wealth. Modern Chinese society continues to have many aspects that still emphasize family wealth. We see this today in the continued inadequacy of China’s social welfare system, where Chinese parents still need to save all their wealth in order to pay for the education, and buy real estate for later generations.

It is thus rather unrealistic to expect all of China’s Millionaires to become super-givers soon. After all most of them are the first generations of millionaires. After so many years of penury, it is only natural for them to want to hold on to their newly acquired wealth.

Short History of Luxury: “I have it and I want to flaunt it..”
From a luxury standpoint - we cannot expect China’s rich to start appreciating the nuances and subtleties of super luxury products and services. They have earned it recently and they would want to show it. A Chinese expression “大气” or da qi (the big and glorious) captures their state of mind rather well. Thus luxury that helps them demonstrate their achievement and success will do better than the classic understated luxury.

2. No Philanthropic Role Models: “I should give all my money for ‘noble’ causes like whom?”
Bill Gates and Warren Buffett have had historical precedent from such past American philanthropists as Carnegie, Rockefeller, and Ford. China does not have many distinct philanthropic heroes in its own history. It will take time for China to have it’s own super-rich philanthropists. While people like Jet Li are already doing this in some way – there is still a lot that needs to be done to create social icons out of givers.

No role models in Luxury: “Unique style, like whose?”
From the luxury standpoint as well, there is a long way before China established its own set of luxury role models. There are still not many rich and successful men and women who have a distinct style that could inspire the other rich to develop their own unique style or get inspired by a new Chinese model of luxury and style. Today majority of role models in luxury and style are from the west and the choice of products of these luxury icons is emulated for their novelty and badge value rather unique resonance with one’s personal style.


3. Limited reliable ways to contribute to the society: “There is infrastructure to spend but limited infrastructure to give”
"If my donation doesn't end up helping the needy I'd feel cheated, to me it's not a question of money," said Cao Dewang, CEO of Fuyao Group - the biggest glass manufacturer in China- in a recent interview with CCTV. The news channel went on to say that Cao pledged to donate RMB 200 million to 100,000 low-income households via the China Foundation for Poverty Alleviation, a non-profit charity overseen by the government - but would do so only after signing a detailed contract to ensure that his money falls into the right hands. Jet Li is also quoted to have said in a recent interview that, “The main reason [why Chinese are skeptical about donating] is because there is an inherent mistrust in giving your money to any third party to pass it on. They’re convinced that for every 100 that they give, the end party won’t receive anything near that 100.”
The lack of a robust and matured ‘infrastructure to give’, accentuates concerns about giving in general.

Shop for status not style: “It is expensive and everybody knows that – that’s enough for me..”
From luxury’s perspective, Mainland and Hong Kong shops are loaded with the most exotic in luxury with brands that boast of steep price tags, ironically they are all picked up from the shelves just for that reason viz. - the price and the exotica rather than a brand’s unique ability to pronounce one’s personal style. There is infrastructure to spend but there is no infrastructure to understand the nuances of luxury and then spend in a way that reflects personal taste.

4. A different kind of philanthropic instinct: “Pragmatic Philanthropy that makes people self-reliant”Billionaire Guo Jinshu told Xinhua recently "In China, an entrepreneur's top responsibility is to keep his own business sound, to fulfill taxation payments, and create jobs. This is also out of a philanthropist heart." Guo’s remarks remind us of the old Chinese adage “if you feed the poor – you feed him today, if you tell him how to fish you feed him for a lifetime.” There seems to be a more pragmatic outlook towards philanthropy among some quarters of the Chinese rich. While the pragmatism is real – there are still not many avenues to help people donate this way.
Another cultural factor is the need to not talk about how much one gave out. Some of the media reported that the billionaire duo, were not well received in China because they publicized their charity efforts. This is not always the Chinese way of giving – “if you give, you don't really need to announce it."


5. Sense of insecurity both physical and financial: “If people come to know that I have enough to start giving, I might not there to be able to give tomorrow..”
It is interesting to note how every week, local newspapers in China publish pictures of the country’s lottery winners showing up to claim their oversized checks in disguise. Almost all the winners resort to some kind of mask to hide their real identities for the fear that if they get recognized they might not be left alone to enjoy the newfound money. Many people are said to have hidden the windfall even from their family members and continue to lead their normal life. There is threat perception about being identified as someone who can cough up money when needed.
People no matter how prosperous – want to ‘lie low’ and keep off the radar. They do not want to attract attention for they are not confident about their security. This insecurity comes in part from the fear of have-nots – who might be simmering with discontent and the other part comes from scrutiny by Tax and other regulatory bodies.

Camouflage fortune by harping hard work and performance instead: “Make me look like a self-made success, not just rich and privileged”
This is one of the biggest challenges for luxury marketers. As the luxury buyers get increasingly insecure about their personal and financial wellbeing, luxury purchases will get impacted sooner or later. The need for showing off one’s wealth will collide with the need to lie low. Volks Wagen’s (VW) Phaeton is a great example of the need for understated luxury but for entirely different reasons. Phaeton is priced between RMB1-2 million but looked like a big Passat to many (a mid priced car from the same stable). The brand became a laughing stock on Internet with many jokes around it about being a high priced mid-range car. Not withstanding this the car still sold very well in Northwest China for exactly the same reasons – with its high price and plain vanilla looks – it was the designated as a“service car” of the local officials and the Army who did not want to be seen wasting tax payer’s money on luxury cars.
Buyers might need to exercise restraint while purchasing brands that give out the story of their bank balance. While symbols and imagery that connote fortune, power and status has traditionally been the mainstay in luxury advertising in China, it might need to acquire a new avatar that focuses on success and achievement from performance & hard work rather than just glory & big fortune.

BaBi was only a dinner banquet but it has a lot to say about the large and growing number of the Chinese super-rich. While this group is an extremely profitable source of growth for luxury marketers, it has its unique characters. It is vital to understand the real nuances of Chinese Philanthropy & Luxury for greater impact in future. And by the way, understanding the Chinese rich might not always require a one-on-one interview!

Compulsively Impulsive 1.2

Seven years back I wrote something about impulse buying. The discourse hovered around apparel, fashion accessories, nick knacks, chocolates, confectionary items and frozen desserts. Those were the days when impulse buying was conditioned by shopper’s physical presence in the market. Impulse to buy used to strike when we were window-shopping, or when we were just walking down the street, saw a candy store and felt like munching something sweet - for no particular reason.


Fast-forward to 2010. After waiting for almost 2 years, I think I can now write this. Today there are enough iPhones around me (+ there are others – Google, RIM, LG etc – all is trying to ‘App-Enable’ their devices). The app economy is real. But there is something more than the cute games and smart productivity tools that the App Economy has created. I call it Impulse 1.2. The App World has single handedly personalized & digitized our purchase impulse like nothing else had before it.

If the success of eBay’s mobile application is any indicator then personalized and digitized impulse has already reached unimaginable heights. Earlier this year someone bought a Lamborghini Gallardo Spyder for $139,000! If this example sounds like an extreme think about all the apps that are being bought on impulse. I know people who have bought almost $100 worth of apps in a year out of which not more than 10% are used actively. Sounds very similar to the many unused shoes in a woman’s cabinet!


Smart phones are doing to e commerce what SMS did to phone calls -Personalization, Spontaneity and Intimacy. If ecommerce helped people to shop from home, mobile commerce is helping people shop at the speed of thought (and feelings), from wherever they are. The collapsing of the time barrier between the desire to buy and the booting of a computer has lead to browsing & buying from the comforts of your couch. The time elapsed between knowing that the cushion behind your back is not comfortable or the flower vase on the table in front needs to change, and actually buying these has really shrunk. After reading about HiFi for many years ago, I finally begin to see it.

Market watchers estimate that the global mobile e commerce business which was worth about $18 billion in 2009, would grow explosively and reach $ 119 billion in 2015. The statistic does not surprise at all. Our emotions are fickle; expect mobile commerce to ride our flickering feelings like no other business has ever done in the past.

Meaning of Human Development – Notes from streets of Hong Kong

This is my fourth time in Hong Kong in the past two and a half years. I now feel that know something about this city. Something more than just a passing tourist’s photo stream or Visa hopeful’s city maps. So after a lot of back and forth, mental dribbling and a heavy downpour on my way from the nearest subway station, I decided to pen down my thoughts.

Hong Kong is like a moving theatre paused forever - everyone is moving around but nobody is going anywhere. It is tall, very busy, sometimes green, most of the times gray, proud of its glass-concrete, very cramped, always rushed, mostly hashed often rehashed, super calculative and much more of these. It is overflowing with business suited; straight haired fast walking women and carefully gelled, well clothed men, with the latest designs in apparel and accessories. They all seem to have come straight out of a style magazine.
Even the traffic police refuses to be ordinary. It is so well equipped that for a man like me who is used to seeing police with a big bamboo cane, these blokes look like astronauts who lost their way back home and ended up in the street.



Hong Kong has it all. It has the glamour, the energy, the stars and subway lines full of people who look like stars but have somehow decided to take the subway with you!

It makes you feel good about being single. It is a city that makes you want to be bachelor. It makes you want more. No, it actually makes you greedy and totally insatiated, for no matter how much money you decide to carry in your wallet – you will almost always feel poor.

Hong Kong is sorry-serious. No one has time for now. No one has time for anyone. No one has time because they have already spent all of it to make the money that can get them the time they really want. Everyone is busy fuelling his tomorrow.

Hong Kong speaks and you listen. Beeps, clicks, alarms, horns, announcements, and other such similar sounds dominate the airwaves, telling you about your mundane life. These are the sounds of the system that no one can see but everyone is blissfully intoxicated with. These are sounds that hold conversations and gentle whispers to ransom.



Stand anywhere in the city and you can’t escape the constant humming of the street. It is the echo of traffic sounds rising along the tall buildings that literally have their heads in the clouds - like a halo of some kind – of success or struggle, you decide.

So many people brush past you but nothing really touches. The touches do not move. The moves are not lasting.

In Hong Kong even the weather cannot touch you. The rain becomes a hassle - at best a topic of discussion about how it spoilt the dress or slowed the traffic or made you remember that you need to carry the umbrella. The raindrops disappear on their way down the glass panes – hoping for someone to notice them.



The bright sun is blocked and bored behind the buildings – with nowhere to go, other than home. The incandescence of the Vichy & Fancl signage never really allows people to look very far. The pursuit of a colon cleaned glowing look is what dominates many a damsel’s weekend agenda.





Hong Kong is the dwarf king of opportunity who gives each of his dwellers a personal shield. A shield of indifference, that makes it easy not to look people in their eye. A shield, that makes it easy to carry an expression that will discourage people from approaching you or smiling at you. And a shield that makes it easy to turn every interaction into a transaction, a transaction that must be completed in the notional quota of time allotted for it, for time is to be earned here not spent. Hong Kong is overflowing with human heat with no traces of warmth.

Not surprisingly - I see the marketing world understanding and profiting from this state of the society. On one side are adverts that talk about making women more attractive in various ways – from cosmetics, to mineral water and push up bras – and help them put their best foot forward (and get ahead in the corporate or guy game). And on the other hand there is the personalization and warmth industry that is trying to draw people’s attention. You see a cell phone exclaiming ‘let the life come to you’ (read enjoy yourself /get a life! With the social media features etc) and we have an airline exclaiming that each of her staff really enjoy what they do - so you can be sure of getting personalized services on board! (Read we are not cold and mechanical!)

Why has Hong Kong come to be like this?

Is it the dogged pursuit of money that makes people pragmatic and cold?

Is it the development or lack of it?

Is it their embrace of the ‘western ways’ of life that makes the city so full of itself with no room for anything else?

Is it the cultural change sponsored by the English?

Is it the ethnic background of the Han majority that originated mainly from Guangzhou & Taishan in Guangdong province in Southern China?

It sure is not the English – they were in India long enough, but India did not become like this. Not even the really big cities like Mumbai.

Then what is it?

It is Darwin?

When you put 70,55,071 people in about 1104 square kilometers, you get a density of over 6000 people for every kilometer. You also get an urban jungle, thin on all kinds of personal resources.

Hong Kong is just this – an urban jungle where everyone is fighting for survival and minding the gap between what they need today and what they can get. The daily struggle for survival takes out the humane from the humans. From there comes the dog eat dog race, the survival of the fittest - the constant challenge to outlast the one next to you. And Hong Kong does outlast almost everyone - with an average life expectancy of 80 years for men and 86 years for women – Hong Kong is ahead of almost the whole world when it comes to survival! But ‘survival’ and ‘living’ were never really the same. I also find the ‘survival of the fittest’ a little awkward because if you look at the development indices – Hong Kong is a developed city, in fact it is among the top Alpha Cities of the world. Developed and yet struggling for survival?! I have not been to another place like this before.

I often used to tell my parents, that Hong Kong is like a bonsai New York. This time I added one more thing to this description. Hong Kong is the Mumbai without the innocence but with the flyovers and other trappings of a developed world. I say this because Mumbai is not very different from Hong Kong in some basic ways. In about 600 square kilometers we have about 13830884 people, which gives us a density of 22,920 people per square kilometer – far higher than Hong Kong’s. But still – Mumbai does not feel the same dog-eat-dog, survival of the ‘coldest’ place or at least not as much. It still has some innocence left in it.

Why?

I believe it is the stage of development. The more economically developed a place, the more people believe in the Theory of Evolution. Look the survey chart here - it shows belief in Darwinism across the most developed societies in the world. I am sure if this survey were carried out in Hong Kong, it would also figure in the upper quartile.



Truth always seems to come with a dose of irony. The idea of development is usually linked with notions of peaceful coexistence and equilibrium etc. However it also seems that as societies develop, they tend to become more of where we as a species started from – believers in survival of the fittest.

As the rest of China urbanizes – I would not be surprised to see more Hong Kong’s mushrooming all over the country. Shanghai is leading the charge on this front, as it strives to become ‘a very big & influential Hong Kong’.

Personally I hope more cities continue to be like Beijing or Bombay - as big and warm at heart as they are in size and scale.

May the innocence live longer..